PLR 1049022: Parent receives more time to file a consolidated return election

Plain-English summary

This ruling concerns a parent corporation and its subsidiary that intended to file a consolidated federal income tax return but did not timely make the election. The IRS granted the parent an extension of time, until the specified date, to make the election by filing a consolidated return and attaching Form 1122 for the subsidiary. The relief was based on findings that the taxpayers acted reasonably and in good faith and that the extension would not prejudice the government. The extension is conditioned on their aggregate tax liability not being lower than it would have been if the election had been timely, and the ruling does not decide whether they substantively qualified to file a consolidated return.

Ruling snapshot

• Question: May the parent and subsidiary make a late election to file a consolidated federal income tax return?
• Outcome: approved
• Key authorities: IRC §§ 1501, 1502, and 6501; Treas. Reg. §§ 1.1502-75, 301.9100-1, and 301.9100-3.

Full text (IRS public release)

Internal Revenue Service Department of the Treasury
Washington, DC 20224

Number: 201049022 Third Party Communication: None
Release Date: 12/10/2010 Date of Communication: Not Applicable
Index Number: 9100.20-00, 1502.75-00
Person To Contact:
-------------------------- ----------------------, ID No. -----------------
---------------------------- Telephone Number:
----------------------------------------- ---------------------
----------------------------------- Refer Reply To:
CC:CORP:B03
PLR-119178-10
Date:
August 27, 2010

              -----------

Legend

Parent = -----------------------------

Subsidiary = ---------------------------------------------------------

Company Official = -----------------------------------

Tax Professional = ----------------------------------------

Date 1 = --------------------------

Date 2 = ------------------------

Dear ----------------:

   This responds to your letter dated April 27, 2010, requesting an extension of time

under §§ 301.9100-1 through 301.9100-3 of the Procedure and Administration
Regulations to file an election. The extension is being requested for Parent and
Subsidiary to make an election to file a consolidated Federal income tax return, with
Parent as the common parent, under § 1.1502-75(a)(1) of the Income Tax Regulations
(hereinafter referred to as “the Election”), effective for their taxable year ending Date 1.
Additional information was submitted on August 13 and August 19, 2010. The material
information submitted for consideration is summarized below.
PLR-119178-10 2

   Parent is the common parent of an affiliated group of which Subsidiary is the only

other member. Parent intended that Parent and Subsidiary file a consolidated Federal
income tax return for the taxable year ending on Date 1, but for various reasons a valid
Election was not filed. The period of limitations on assessment under § 6501(a) has not
expired for Parent’s or Subsidiary’s taxable year ending Date 1 or any subsequent
taxable year.

    Section 1501 provides that an affiliated group of corporations has the privilege of

making a consolidated return with respect to the income tax imposed by chapter 1 of the
Code for the taxable year, in lieu of separate returns. The making of a consolidated
return is subject to the condition that all corporations which at any time during the
taxable year have been members of the affiliated group consent to the consolidated
return regulations prescribed under § 1502 prior to the last day prescribed by law for the
filing of such return. The making of a consolidated return is considered such consent.

    Section 1.1502-75(a)(1) provides that a group which did not file a consolidated

return for the immediately preceding taxable year may file a consolidated return in lieu
of separate returns for the taxable year, provided that each corporation which has been
a member of the group during any part of the taxable year for which the consolidated
return is to be filed consents to the regulations under § 1502. If a group wishes to
exercise its privilege of filing a consolidated return, such consolidated return must be
filed not later than the last day prescribed by law (including extensions of time) for filing
the common parent’s return.

   Under § 301.9100-1(c), the Commissioner has discretion to grant a reasonable

extension of time to make a regulatory election, or a statutory election (but no more than
six months except in the case of a taxpayer who is abroad), under all subtitles of the
Internal Revenue Code except subtitles E, G, H, and I.

   Section 301.9100-1(b) defines the term “regulatory election” as including an

election whose due date is prescribed by a regulation, revenue ruling, revenue
procedure, notice, or announcement. Sections 301.9100-1 through 301.9100-3 provide
the standards the Commissioner will use to determine whether to grant an extension of
time to make a regulatory election. Section 301.9100-1(a). Section 301.9100-2
provides automatic extensions of time for making certain elections. Requests for relief
under § 301.9100-3 will be granted when the taxpayer provides evidence to establish
that the taxpayer acted reasonably and in good faith, and that granting relief will not
prejudice the interests of the government. Section 301.9100-3(a).

  In this case, the time for filing the Election is fixed by the regulations (i.e.,

§ 1.1502-75(a)(1)). Therefore, the Commissioner has discretionary authority under
§ 301.9100-1 to grant an extension of time for Parent and Subsidiary to file the Election,
provided Parent and Subsidiary show they acted reasonably and in good faith, the
PLR-119178-10 3

requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and granting relief will not
prejudice the interests of the government.

    Information, affidavits, and representations submitted by Parent, Company

Official, and Tax Professional explain the circumstances that resulted in the failure to
timely file the Election. The information establishes that the request for relief was filed
before the failure to make the Election was discovered by the Internal Revenue Service.
See § 301.9100-3(b)(1).

   Based on the facts and information submitted, including the representations

made, we conclude that Parent and Subsidiary have shown they acted reasonably and
in good faith, the requirements of §§ 301.9100-1 and 301.9100-3 are satisfied, and
granting relief will not prejudice the interests of the government. Accordingly, an
extension of time is granted under § 301.9100-1, until Date 2, for Parent to file the
Election (by filing a consolidated return, with Parent as the common parent, and
attaching a Form 1122 for Subsidiary) for their taxable year ending Date 1.

    The above extension of time is conditioned on the taxpayers’ (Parent’s and

Subsidiary’s) tax liability (if any) being not lower, in the aggregate, for the taxable year
ending Date 1, and all subsequent years, than it would have been if the Election had
been timely made (taking into account the time value of money). No opinion is
expressed as to the taxpayers’ tax liability for the years involved. A determination
thereof will be made by the Director’s office upon audit of the Federal income tax
returns involved. Further, no opinion is expressed as to the Federal income tax effect, if
any, if it is determined that the taxpayers’ liability is lower. Section 301.9100-3(c).

    We express no opinion with respect to whether Parent and Subsidiary qualify

substantively to file a consolidated return. In addition, we express no opinion as to the
tax effects or consequences of filing the Election late under the provisions of any other
section of the Code or regulations, or as to the tax treatment of any conditions existing
at the time of, or effects resulting from, filing the return or the Election late that are not
specifically set forth in the above ruling.

   For purposes of granting relief under § 301.9100-1, we relied on certain

statements and representations made by Parent, Company Official, and Tax
Professional. However, the Director should verify all essential facts. Moreover,
notwithstanding that the extension is granted under § 301.9100-1 to file the Election,
any penalties and interest that would otherwise be applicable, if any, still apply.

   Except as expressly provided herein, no opinion is expressed or implied

concerning the tax consequences of any aspect of any transaction or item discussed or
referenced in this letter.
PLR-119178-10 4

  This ruling is directed only to the taxpayer(s) who requested it. Section

6110(k)(3) provides that it may not be used or cited as precedent.

   A copy of this letter must be attached to any income tax return to which it is

relevant. Alternatively, taxpayers filing their returns electronically may satisfy this
requirement by attaching a statement to their return that provides the date and control
number of this letter ruling.

     In accordance with the Power of Attorney on file with this office, a copy of this

letter is being sent to your authorized representative.

                                   Sincerely,


                                   Ken Cohen
                                   Senior Technician Reviewer, Branch 3
                                   Office of Associate Chief Counsel (Corporate)